The process leading to board elections is a key issue in corporate governance, and has come into the spotlight after the financial crisis. Italian regulation in this field is unique, and has been mentioned by the EU Commission in the Green Paper on corporate governance as a possible leading example. Since 2007 all listed companies are required to reserve at least one board seat to “minority” candidates; consequently, even investors holding a small block of shares have a real opportunity to get (at least) one seat on the board. After presenting Italian regulation and its evolution over time, we study the determinants of minority shareholders’ decision to submit a slate of board candidates. Making use of a database covering all corporate elections over a three-year period, we show that activism in corporate elections is associated with firm characteristics and, above all, ownership structure, while the actual rules governing corporate elections in each company are seemingly less relevant. We also show that mutual funds’ activism is influenced by firm size, but is substantially insensitive to voting rules. This allows us to draw conclusions which are relevant for a number of policy issues concerning board elections.
Belcredi, M., Bozzi, S., Di Noia, C., Board elections and shareholder activism: The Italian experiment, in Belcredi, M., Ferrarini, G. (ed.), Boards and shareholders in European listed companies. Facts, context and post-crisis reforms, Cambridge University Press, Cambridge 2013: <<International Corporate Law and Financial Market Regulation>>, 250- 285 [http://hdl.handle.net/10807/41864]
Board elections and shareholder activism: The Italian experiment
Belcredi, Massimo;Bozzi, Stefano;
2013
Abstract
The process leading to board elections is a key issue in corporate governance, and has come into the spotlight after the financial crisis. Italian regulation in this field is unique, and has been mentioned by the EU Commission in the Green Paper on corporate governance as a possible leading example. Since 2007 all listed companies are required to reserve at least one board seat to “minority” candidates; consequently, even investors holding a small block of shares have a real opportunity to get (at least) one seat on the board. After presenting Italian regulation and its evolution over time, we study the determinants of minority shareholders’ decision to submit a slate of board candidates. Making use of a database covering all corporate elections over a three-year period, we show that activism in corporate elections is associated with firm characteristics and, above all, ownership structure, while the actual rules governing corporate elections in each company are seemingly less relevant. We also show that mutual funds’ activism is influenced by firm size, but is substantially insensitive to voting rules. This allows us to draw conclusions which are relevant for a number of policy issues concerning board elections.
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